In October 2024 the Constitutional Court, although dealing with a medical schemes claim, pertinently confirmed that where an insurer avoids a policy on the grounds of misrepresentation or non-disclosure whether under the common law or the Short-term Insurance Act, the insurer has to prove that the non-disclosure of a material information induced it to enter into the contract. This is a subjective test. The question is: Was the insurer induced by a failure to disclose a material fact to issue the policy? In making the enquiry, evidence that the insurer had a particular approach to risks of the kind in question would be relevant and could be cogent. The decision entails that the statutory test and the common law test are the same.
The court was reaffirming what was said in Regent Insurance Company Limited v King’s Property in 2014.
The medical scheme in this matter did not produce any evidence to show that it was, in fact, induced to enter into the contract with the member by the non-disclosure and the claimant for medical scheme benefits succeeded in reinstating the membership contract that had been avoided on the basis of alleged non-disclosure.
In the particular case the membership of the medical scheme of the claimant had been terminated. The medical scheme had to show what its membership acceptance practices are in relation to applicants who make full disclosure and have similar medical histories to that of the member they want to terminate on the grounds of non-disclosure. Medical schemes provide a gateway for many South Africans to the right to have access to health care services and the court granted leave to appeal for that reason, among others.
This finding will apply equally to misrepresentation as a ground of avoidance under the Long-term Insurance Act.